So you’ve decided to buy a house! Maybe you’ve found the house of your dreams, or want to invest in property, or just think a mortgage will be cheaper than renting. But now you’ll need to know how much you can afford to pay. Figuring out that number isn’t always easy, but there are a number of useful tools you can use to start the process.
There’s an abundance of mortgage calculators available online, each offering a different set of features and extras, but these are the only three you’ll need, no matter your situation. If you have any recommendations for mortgage calculators you’ve used in the past, share them with us in the comments below!
Just the Basics
When you’re just starting your search, you need to get a basic idea of what you can afford. As with so many things, Google has a tool to make your life easier. Just type “mortgage calculator” into the search bar and it brings up a simple widget.
Type in the amount you want to borrow, the interest rate, and the mortgage period, and it will tell you how much you can expect to pay per month. If the answer it gives you is way outside what you’d be able to pay, you’ll either need to find ways to make more money or settle for a cheaper property. The right-hand tab allows you to reverse the process by putting in what you can afford per month to see how much you’d be able to borrow.
Alternatives — If you can’t access Google’s calculator, calculator.com and moneychimp.com both have similar no-frills calculators that are slightly more customizable than Google’s.
Getting Down to Business
Google’s widget is fine for a ball-park idea of what a mortgage will cost you, but sooner or later, you’ll need more precise figures. You’ll have to take into account things like tax, insurance and your credit rating.
The widget at MortgageCalculator.org works in the same way as Google’s, but has additional fields for property tax, private mortgage insurance (PMI), home insurance, and home owners’ association (HOA) fees. Once you’ve found all these numbers and plugged them in, you’ll inevitably find that you can afford less than you thought, but it’s a much more accurate figure than the one you got from Google.
The site will also show you the best mortgage rates available based on where you want to buy (US only) and your credit score, with links to lending institutions so you can get quotes. It even provides the code to add its mortgage calculator to your own site.
Alternatives — Calculator.net has a similar widget, with an extra field for other costs, and a very straightforward layout with monthly payments easily visible. Zillow has a basic and advanced version with the option to find lenders and even get pre-approved for a mortgage.
Crunching the Numbers
A home is likely the biggest purchase you will ever make, and a mortgage is likely the biggest loan you’ll ever take out. Because it’s for such a large amount of money and such a long period of time, tiny changes in interest rates or monthly payments can make a big difference to how much you pay over all.
It’s well worth crunching the numbers to see whether you should be looking for a cheaper house, making extra payments now to reduce the interest, paying off a lump sum or changing the terms of your existing mortgage.
Karl’s mortgage calculator has everything you’d find in any other calculator, as well as additional fields for sundry expenses, different versions tailored for different countries, graphs and tables accessible at the touch of a button, and the ability to export to CSV.
It allows you to factor in extra payments and see how much you’ll save by paying more up front or even to see the effect of different interest rate changes in an adjustable rate mortgage (ARM). It’s worth putting in different figures to get a solid understanding of what could happen to your monthly repayments if interest rates were to change.
Alternatives — There’s really nothing out there as comprehensive as Karl’s calculator, but Home Mortgage Calculator at Vertex42 does most of the same things. It’s an Excel spreadsheet template, so you can easily customize it to your own needs and use it with other financial spreadsheets to manage your money.
Whichever calculator you use, the most important thing is that the numbers you input are accurate. If you don’t have exact figures to begin with, you can use the defaults until you do, but ultimately you’ll need to have the correct numbers or the output will be wrong. It’s important to get these details right, as going into debt can have serious consequences for your finances. If the numbers add up, soon you could be getting the keys to your dream home!
Have you found a better mortgage calculator than the ones listed here? Any other tips for those taking the plunge into the property market? Let us know in the comments.